As voices of protest rang out during the pandemic year, Jorge Rios had a front row.
The former high school teacher from Mexico wasn’t just watching crowds massing in the U.S. and elsewhere over George Floyd’s murder, Black Lives Matter, anti-government sentiment and other issues. Rios was monitoring rows of computer equipment and hearing his chief technology officer shouting things like: “We’re blowing up in Myanmar. We need more servers.”
Rios created a messaging app called Bridgefy, an encrypted communications platform that relies primarily on Bluetooth and mesh networks, not the internet. In one 48-hour period of protests over the Myanmar coup, Rios said, the app was downloaded 1 million times.
But Bridgefy almost didn’t happen. Rios approached multiple venture capitalists seeking development money. His app had been built for low-income people who lacked an internet connection. The funding people weren’t interested.
“We had a hard time finding a venture fund that understood us and our mission,” Rios said. “We would hear: ‘How is this a problem? Everyone has internet.’ They just didn’t get it, didn’t consider poor people. We were constantly going through emergencies in Mexico, during earthquakes, concerts and large events, losing communications. We had a solution, but no funding.”
Ultimately, Rios’ eight-employee firm got the seed money it needed from Mac Venture Capital, a predominantly Black firm trying to help level the venture funding playing field. The Los Angeles operation is one of several relatively new venture capital players — people of color interested in improving diversity in the founders they fund and the markets those firms hope to target.
For Rios, Mac Venture was the choir he didn’t have to preach to. “They understood immediately what we were trying to do,” Rios said.
Rios’ company is an example of what has and hasn’t changed in the venture capital world.
Bridgefy, which maintains offices in Mexico and San Francisco, received backing after years of trying. But for many entrepreneurs of color and women of all races, venture funding remains a mostly impenetrable barrier to success.
Venture funding is a major gateway to entrepreneurship, particularly in technology. It is an important catalyst for the development of new technology companies, the nurturing of big ideas and the start of new technologies and services.
For many business founders and women of color, it’s still a closed door, experts said.
“The disparity in who the venture capitalists are and where their money goes is just phenomenal,” said Katherine Klein, a management professor at the University of Pennsylvania’s Wharton School of Business.
Klein cited a diversity study by review platform RateMyInvestor.com that examined the records of 135 of the largest venture capital firms. The review website found that from 2013 through 2017, women led just 9.2% of the start-ups that got money. Less than 2% had a Latino founder, and 1% was led by a Black person.
The funding level hasn’t improved since then, recent data from Crunchbase indicate.
Black- and Latino-owned U.S. companies, respectively, received $1 billion and $2.7 billion in venture funding during 2020, just 0.6% (for Black entrepreneurs) and 1.7% (for Latino entrepreneurs) out of a total venture funding pool of $161.4 billion to U.S. companies.
This year, from January through May 19, Black business founders surpassed the amount of venture funding they received during all of the previous year, with $1.6 billion, Crunchbase said. Still, it represented a tiny portion of overall venture funding over the same period, at 1.4% out of $110.4 billion.
Latino business founders’ share of venture funding has slipped in 2021, at $1.7 billion, or 1.5% of…